EUR/USD rebounds to near 0.9960, downside looks likely on hawkish Fed bets

• EUR/USD has displayed a short-lived pullback around 0.9960, more weakness is imminent.
• Soaring core CPI indicates a sheer rise in durable goods prices.
• Eurozone bulls have weakened amid rising pessimism in the trading bloc.

The EUR/USD pair has picked bids around 0.9960 in the Asian session after nosediving from a high of around 1.0180. The asset witnessed an intense sell-off after surrendering the critical support of 1.0100 after the release of surprisingly higher-than-expected US inflation data. In the Asian session, the shared currency bulls have attempted a rebound but seem short-lived and sooner will resume a downside journey towards a 19-year low at 0.9864.

A rebound in the US Consumer Price Index (CPI) has refreshed the odds of a third consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed). It seems that prolonged efforts of Fed policymakers to cool down the red-hot inflation went in vain. The decline in the headline CPI from the prior release is a result of falling gasoline prices.

While price rise index for durable goods has escalated as core CPI that doesn’t inculcate food and oil prices has stepped up to 6.3% vs. the forecasts of 6.1% and the prior release of 5.9%. This is going to trouble the households as their labor cost index data has remained subpar.

Meanwhile, eurozone bulls have weakened on a decline in ZEW Survey- Economic Sentiment. The economic data declined sharply to -60.7 against the expectations of -52 and the prior release of -54.9. A decline in the confidence of institutional investors in an economy suggests that the retail demand and investments from corporate and foreign investors are expected to drop significantly.